What a Property Advisor Has Learned From 20 Years of Property Investing

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What lessons stay consistent after 20 years in property?

I have now been in property for over 20 years, as a valuer, buyer agent, property advisor, property researcher and, most importantly, as a property investor.

Working with medical professionals, expats, business owners and high-net-worth individuals, I have bought over 1,000 properties for clients. I have seen many property investors succeed, and others with the potential for success fail.

I have reviewed every strategy, bought in every state in Australia, and bought across all major property asset classes.

While things in the property market are always changing, and we are still learning every day, I have come to appreciate that there are 7 things that do not change when it comes to building a successful portfolio.

Why should investors start with a clear goal?

Most people we see have a goal to buy property, where that should never be the goal. The goal should be to make money, followed by two more questions: how much money, and by which date?

I see people all the time who have 5 or more properties with zero equity and, in some cases, negative equity. Only then do most truly understand that what they really wanted to do was make money.

Trying to impress this upon new investors is always a challenge. You cannot develop a strategy without a goal. The goal determines the strategy.

How does strategy shape property investment success?

When most people think of investing in property, they think residential. They buy in their local market where they can see it, which seems rational.

But as an investment, if you applied that same rationale to stocks, you would only buy shares in companies that were based within a 5 km ring of your home. Not so rational if the goal is to make a certain amount of money within a specific timeframe.

The strategy’s purpose is to find the pathway to your goal that carries the least amount of risk, encompassing your income, your timeframe, market conditions and effective property investment strategies at that time.

Through this planning process, you may work out that you need to adjust your timeframe or end goal, because getting there may require taking on too much risk.

It is normal to go back and forth, and for goals to change slightly over time as life changes outside of property.

The cornerstone of the strategy, however, is risk management. Always protect the downside first. This permeates from the macro strategy right down to the due diligence on physical assets.

Why do cash buffers matter for property investors?

This is the central piece of the risk management strategy and provides the essential “sleep at night” factor.

With debt comes risk, and we need to manage this debt with the greatest respect. A cash buffer provides you time to work through any issues, such as a drop in household income, loss of employment, sickness, rising interest rates, long vacancy or a combination of these things happening at once.

COVID-19 is an excellent example of where multiple things can go wrong at once. On average, we have had a major financial shock every 10 years, so we need to be prepared for this. It should never come as a surprise.

A cash buffer enables you to have the least amount of stress during these times and, most importantly, avoid being in a forced-sale situation, which is the worst place you can be as an investor.

As a general rule, we recommend a minimum cash buffer of 4–6 months, but in harder economic times, or the closer you are to retirement, we will recommend increasing your cash buffer.

How important is personal income when building a portfolio?

Investing in property will eventually provide passive income, but between then and now, you need to provide a portion of your income and savings to the property portfolio.

Like all things in life, you reap what you sow. And 20 years of sowing is, in most cases, what it takes to replace your income.

Ensuring that your household is consistently bringing in income, and that income is rising over the years, is one of the keys to growing a successful portfolio.

Banks are currently lending at roughly 6–7 times household income. So, if you’re on an annual salary of $80,000, your total borrowing capacity will cap out around $500,000. This would be enough to buy 1 property in a regional town.

If your household brings in $400,000, not only will you be able to borrow over $2.5m, but you should also have the ability to save aggressively and pay down debt aggressively.

So, focusing on your household income growth is essential.

What does value really mean in property investing?

I get frustrated when you read property books and experts talk about buying below market value. In my experience, to have this as the strategy is fool’s gold.

Primarily, this is because buying under market value is one of the hardest things to do if you have a quality asset in a market that is starting to rise, which is exactly what and when you should be buying.

When we talk about value, we look first at where this suburb is likely to be in the short to medium term.

This is done by reviewing the key fundamentals: demand versus supply, affordability and confidence, to see if current prices show value given the dynamics of those key fundamentals.

Secondly, our focus is not buying under market value, but trying to buy under replacement cost. When you buy under replacement cost, your downside risk is limited, and the market is generally in undersupply, as developers do not develop when they cannot make a profit.

Why does asset quality matter in all market conditions?

There are 3 elements to quality: the suburb, the location within that suburb and the property’s physical attributes.

Without oversimplifying this point, the primary reason why quality is essential is because quality property can be rented or sold in below-average or poor market conditions.

This provides liquidity and cash flow in all market conditions.

The secondary reason is that in hot markets, you frequently see premiums being paid on quality property well above true market value.

Why is patience one of the most important parts of investing?

This process will take time. Any market can go up, down or sideways in the short term. However, over the long term, all markets must move to the fundamentals.

So, bet long term and bet with the fundamentals.

When you find a market that shows value, sometimes that market can increase 75% 5 years after you enter, and other times it will take 10 years.

Moving forward, it is likely that growth will be slower and these cycles might be longer than what we have previously experienced.

If you are not prepared for this, you have to question whether investing in property is right for you.

The number one issue we have experienced with our clients not achieving success is them not being in their property assets long enough.

Unfortunately, the market does not care about your timeframes. No individual can control it. We cannot speed it up. So you need to have faith in the strategy and give it time.

How can a property investment advisor help investors stay disciplined?

A property investment advisor can help investors connect their goals, risk tolerance, borrowing capacity and asset selection into one clear plan. This matters because success is rarely just about buying property; it is about buying the right assets, in the right markets, for the right reasons.

Many property investment companies talk about growth, yield or market timing, but the real discipline is in protecting the downside while still positioning for long-term wealth creation.

For investors seeking support from a property investment advisor Melbourne team, local knowledge can be useful, but the broader strategy should still consider opportunities across Australia when they better align with the investor’s goals.

What should investors remember before choosing a property advisor?

Be clear about what you want from investing in property, have a strategy, find value, buy quality, constantly work on your income and, with time, you will succeed.

A good investment property advisor should help you make decisions based on evidence, discipline and long-term fundamentals rather than short-term emotion or market noise.

Yours sincerely,

David McMillan

Director, Performance Property